SEC’S OFFICIAL BROKER FIDUCIARY DUTY RULE ON THE SLOW TRACK

SEC’S OFFICIAL BROKER FIDUCIARY DUTY RULE ON THE SLOW TRACK

Just over one year ago, the Securities and Exchange Commission recommended to Congress a regulation that would impose a fiduciary duty for all investment advisers and broker-dealers offering retail investment advice. Throughout 2011, SEC Chairman Mary Schapiro stated that the SEC planned to promulgate this universal fiduciary duty standard. However, as of today, that rule has yet to be proposed and may be on a slow track to death.

Recently, Ms. Schapiro wrote a letter to the House Financial Services Capital Markets Subcommittee stating that the SEC will gather information to perform an economic analysis of the expected impact of the proposed fiduciary standard. The SEC, including economists in the Division of Risk, Strategy and Financial Innovation, are drafting a public request for information “to obtain data specific to the provision of retail financial advice and the regulatory alternatives.” This request is intended to be launched in February of 2012.

After compiling the data, the SEC will prepare a cost-benefit analysis in order to support to propose the rule. Because this process could take months, the SEC has listed the fiduciary duty rule proposal as a “date[] to be determined” on its regulatory calendar.

With concerns that a universal fiduciary standard may raise compliance and litigation costs, the slow track for this rule is welcomed by industry participants. The National Association of Insurance and Financial Advisors’ President Robert Miller believes this process should take a long time. Mr. Miller believes this can only be taken “as a sign that they [SEC] understands the complexity [of the issue] they're working with. It doesn't look like they're trying to put anyone out of business.” Barbara Roper, Director of Investor Protection at the Consumer Federation of America believes it is “increasingly unlikely that we'll get all the way to a final rule by the end of this year” and in fact, believes “we won't get fiduciary duty finalized unless President Obama is re-elected.”